The American economy has always been based in an atmosphere of fierce competition. Some of the most important moments in our history have arisen from great battles between titans of culture and industry: Apple (AAPL) and Microsoft (MSFT), Mantle and Maris, Donald Trump and Donald Trump's hair.
Add now to that list the next great struggle: Justin Bieber vs. the banking industry.
The Canadian pop star and general of a Twitter army is the latest celebrity to promote a prepaid debit card, partnering with BillMyParents to back the Web company's SpendSmart card. The service is aimed at teens and claims to promote responsible spending (like, for instance, $85 for a ticket to Bieber's show in Salt Lake City this weekend).
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BillMyParents' services specifically target teens and, more importantly, their parents by offering reasonable (if possibly too relaxed) spending, withdrawal, and loading limits: $500 per day in withdrawals and spending and a $5,000 maximum balance. The site also offers strict controls that parents can use to monitor their child's spending, like instant text message alerts for every purchase and the ability to remotely lock and unlock the card. This is where the card differs from the cards that are offered by banks and credit card companies.
This naturally pits Bieber's pet debit card against bigger players like JPMorgan Chase (JPM) and American Express (AXP) who have also shown interest in the prepaid card market; increasing regulations on debit and credit cards have banks looking for new revenue streams, and the fee systems that prepaid debit cards employ could make a bundle for the companies that release them.
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While bigger banks plan to leverage their huge resources into an increased customer base, companies like BillMyParents are hoping to use big names like Bieber to appeal to a niche market (although a fanbase of over 32 million Twitter followers is a pretty massive niche). The question is whether parents will shell out a little more in fees in order to satisfy their kids' need to have Bieber's smirking mug on their debit cards, and it's never a good idea to bet against the Beliebers. The fees ($3.95 per month, with a $1.50 ATM fee and a $0.50 fee for loading money from a parent's bank account) are reasonable enough for the kind of family that would use such a system.
While BillMyParents CEO Michael McCoy claims that his company, by focusing mainly on a niche market, can co-exist with the big players, evidence elsewhere suggests that the competition may not always be friendly; US Bancorp (USB) announced in late November that it would be purchasing FSV Payment Systems, a prepaid debit card payment processor. Even small companies with a decent foothold may have trouble keeping pace with the country’s biggest banks.
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Those same banks may have other, more nefarious reasons to want to edge Bieber out of the business; in December, the pop singer clashed briefly with JPMorgan Chase when he and his posse were told that their private ping-pong room was reserved by J.P. Morgan. Bieber reportedly complained, "Why does he get the room and not us?"